What is the difference between an offshore parent company and an offshore holding company?
Website design By BotEap.comWhen doing business abroad, an individual or corporation will commonly take advantage of legal ownership and management structures just as they would in their home country. This is done to make business management more efficient, to increase access to investment capital, and at the same time to reduce the tax consequences of various aspects of the business.
Website design By BotEap.comA holding company limits its activities to holding and managing property investments, shares and other assets, but it does not manage these entities or engage in business or commercial activities through these entities. A famous example, albeit in the US, is Berkshire Hathaway, the brainchild of billionaire Warren Buffet, who owns billions of dollars in stock but does not manage the companies involved. On a smaller scale, where most of the world resides, a holding company can own stocks, property, and more, and manage these investments. It is common for a holding company to have shareholders who invest directly in the holding company and not in the individual holdings of the company. The laws and particular requirements necessary to establish and manage an offshore holding company vary from jurisdiction to jurisdiction.
Website design By BotEap.comA parent company is organized and operates in an offshore jurisdiction. Its sole business is to service its affiliated company through administrative and management services. A company of this type is usually established in a jurisdiction with tax advantages. The company does not buy or sell products or engage in financial transactions as a holding company does. The parent company is a fixed facility owned by an international company.
Website design By BotEap.comThe parent company will be located in a carefully selected foreign jurisdiction whose laws allow it to act for the benefit of one or more companies. Its sole purpose is management control, service and coordination, usually in a specific geographic area. A common situation is that the parent company receives a tax deduction in the sense that it can base its taxation on a national profit that is typically between 5% and 8% of total operating expenses. Depending on the laws of the host jurisdiction, earnings may not be taxed at all and expenses may not be used to calculate tax. Many of the aspects of this type of company depend on the degree to which the host jurisdiction tries to attract foreign companies and the benefits will vary accordingly. As with many offshore companies, it is essential to have the advice and experience of someone familiar with the jurisdiction and its laws.
Website design By BotEap.comThe practical use of holding companies and parent companies in offshore business
Website design By BotEap.comOffshore companies can be established wholly to take advantage of tax benefits in the host jurisdiction. Offshore companies can also be established to take advantage of excellent offshore business opportunities. The ideal situation is to establish an offshore business in such a way that business efficiency and profit opportunity are maximized and taxes are minimized through the judicious use of offshore legal structures.
Website design By BotEap.comHolding companies and other holding structures
Website design By BotEap.comIn the offshore business and legal world, it is common for an individual or corporation to form a legal entity such as a New Zealand trust or a Panama Private Interest Foundation in which to hold assets. These assets can be real estate, stocks, art objects, personal property such as planes and yachts, bank accounts, and international business corporations. In many practical ways, these entities function as holding companies. However, they do provide other features that the individual or corporation may or may not wish to include in their business planning.
Website design By BotEap.comA Panama Private Interest Foundation has no owners. It has beneficiaries. Your retained entities will do business normally, but profit and ultimate control rests on the basis for use for the benefit of the beneficial owners. A Panama Private Interest Foundation will commonly be used in lieu of a trust or will to pass assets to heirs, as the foundation documents are simply amended to change the beneficiaries upon the death of the person who established the foundation.
Website design By BotEap.comSimilarly, an offshore trust will hold assets similar to those of a holding company or foundation, but will be established specifically for the purpose of passing assets to the heirs of the person establishing the trust.
Website design By BotEap.comOne aspect of both offshore established trusts and foundations that is not commonly found in an offshore holding company is a privacy and asset protection feature. Trusts and foundations are commonly established in such a way as to protect the privacy of the principals. It is common for the names of the beneficiaries of foundations, beneficiaries of trusts, shareholders of international business corporations, and owners of offshore bank accounts to be in no way available to the public.
Website design By BotEap.comThe practical use of an offshore parent company
Website design By BotEap.comAs a general matter, a parent company can only be used for administrative purposes in the management of various offshore business companies. Concerns when setting up such a company will generally have to do with the cost of operating in a foreign jurisdiction and how efficiently this management tool will operate. Staffing will be important, as will any requirement by the offshore jurisdiction that local staff be hired on a quota system. In addition, communications facilities and transportation infrastructure will be important both for the daily flow of information and for the movement of key personnel.
Website design By BotEap.comTo the extent that tax considerations enter into decision making with an offshore parent company, the issue will arise early in the decision making process and will be balanced against other practical business considerations and costs.
Website design By BotEap.comTo the extent that an individual or corporation establishing an offshore business chooses to use a parent company as part of the operation, they may also choose to integrate this corporate entity with other offshore solutions such as offshore banking, offshore international business corporations, and offshore trusts. foundations. It is best to do this planning very early in the game if asset protection and personal privacy are top concerns in the business.